Reasonable Demands
Here's one way to think about financial markets: each price tick up or down of a stock reflects changes in the value of expected cash flows of that stock discounted to reflect things like time, the interest rate and how risky a stock is. Yawn. That's a boring model.
Here's another way: YOLO. Crypto. Meme stocks. It's all vibes!
Right now — whenever "right now" is — the clash of supply and demand set prices. It’s true for a pineapple and for shares.
And lots of different things go into demand.
Sure, investors have expectations about future cash flows and that influences their demand for a particular stock. But other stuff feeds demand too. Like: feelings or that YOLO stuff or FOMO or did someone post a meme about it on twitter or did Nancy Pelosi just buy some options or whether an index includes a company. Those things aren't really about value. They're just about demand.
Over a long time, the market does a decent job of supporting the first model — stock prices match how much value companies create for shareholders. That’s why Lamplighter spends most of its energy on that side of the equation. But, "right now" any one of those other things might swamp the rest.
Can management do anything to nudge demand for their company's shares? Should they do anything?
It depends.
If you're a flailing business like, say, AMC or GameStop, its probably easier to hang your hat on drumming up rabid shareholder support for the stock price than turn the business around. So, for them, probably, management'll spend a lot of energy trying to game it.
If you're running a half decent business — one with customers, promising growth and earnings prospects — you'll hopefully focus just about all your time on that. But, every now and then, choices come up and decisions need to be made that might sway demand for shares. Then, management might pause to consider them. There are thoughtful ways to approach those moments.
Three act play
Powerfleet provides fleet management solutions for customers running large logistics operations — think USPS or Walmart. It collects data from a variety of sensors about customers' trucks, forklifts, drivers and things so the customers know what's going on. The company has put in work increasing the value it can deliver to customers through acquisitions and development initiatives. It's built an AI platform to figure out what its customers should do with all the information they collect on their operations. It's done a good job of taking costs out of the business and plans for more — all things that improve the value of the company.
Management has also steered the company to make it easier for investors to invest. It’s done this in three parts.
Its first act grabbed low hanging fruit. The company merged with MixTelematics, which has been listed in Johannesburg — where demand for stocks is lower — and consolidated its listing in the US, the deepest and most vigorous stock market in the world. Lamplighter talked about the shift to the US here.
Powerfleet's other two moves were simpler. It had little say in the second one at all. The Russell 2000 decided to include the company in its index. Lots of funds invest in the Russell 2000 just because index investing is very popular. All those funds have to invest in the companies in the Russell 2000. That's why they exist. That includes newly added ones like Powerfleet. Poof. Increased demand for the stock.
For its third act the company changed its ticker symbol from "PWFL" — which sounds boring and industrial to "AIOT" — which hits buzzwords "AI" and "internet of things."
So, are you saying a new ticker will tip demand enough to bump the company's price?
Probably not.
Is there any downside to seeing if, maybe, it does?
Also probably not.
Could it remind investors and customers in four simple letters of the big challenge the company's trying to tackle and the potential value it delivers to customers?
Probably yes.
Powerfleet's management is busily rolling out high-value services and winning new business. Its transformed itself through two savvy acquisitions in the past 18 months and improved its US stock market listing heft. It doesn't decide who gets included in the Russell 2000 index — The London Stock Exchange manages that — but that’ll boost ownership of the stock. The ticker change from PWFL to AIOT strikes Lamplighter as more of a stretch to increase demand, but it is a simple, constant reminder of the value the company provides.
Will any of these things magically lead to a much higher price for AIOT?
Unlikely. But altogether the program opens the AIOT tent to more investors without resorting to the swashbuckling tactics of Crypto or wallstreetbets or other promotional distractions.
Management can become preoccupied with their companies’ stock and might lose focus on the real things that go into that. When that happens, that preoccupation can be a worry for investors. But, when moments arrive and decisions pop up that might move demand and management thoughtfully considers those and chooses to make it as easy as possible for investors to own the stock — that can be one sign of a fruitful long-term partner and attractive investment.
Disclaimer: None of this is investment advice. It's meant to illustrate ways LCM thinks about investing. Things that LCM decides are good investments for LCM and its clients are based on many criteria, not all of which are covered here. Some or all of LCM's ideas may not be suitable for other investors. LCM does not recommend investing either long or short any position mentioned. LCM may own positions in some of the companies mentioned. Some of its ideas will lose money — investing entails risk. See full disclaimer here.